Extension and Ag Research News


Spotlight on Economics: Emerging Food Risks and Mitigation Challenges

Only by achieving an accurate assessment and reduction of total risks can supply chain managers make informed decisions that lead to the least costly, most effective control of food risks.

By William Nganje, Professor and Department Chair

NDSU Agribusiness and Applied Economics Department

The global food supply network is becoming increasing vulnerable to food safety and food defense risks partly due to the large volume of shipments from domestic and import sources.

Food safety can be defined as food system reliability by reducing exposure to natural hazards, errors and failures. It is the unintentional contamination of food, which may have dangerous and lingering consequences.

On the other hand, food defense is system resiliency by reducing the impact of intentional system attacks from disgruntled employees and terrorists.

A major challenge in mitigating food safety and food defense risks is that increased controls and testing can reduce these risks but also can increase market risks.

Market risk could be defined as the possibility of higher rejection levels. For example, increased market risk would be losses incurred when a produce shipment is delayed or destroyed at a port of entry due to a false-positive swab pathogen test that could be different from a detailed culture test. Also, a producer might initiate a mass recall of finished products rather than a targeted or limited recall because of ineffective traceability.

One approach to address this challenge in economics is to develop strategies to simultaneously reduce all types of risks with real-time traceability systems. Real-time traceability could lead to opportunities for continuous reductions in costs and food risks. It could assist management in a business-to-business supply chain that exceeds minimal government requirements to design systems that detect, prevent and respond to food safety or defense risks in the food supply networks. Real-time traceability reduces error-based disruptions.

When an accurate trace is carried out and the source or agents are identified, the system has an opportunity to improve prevention. When intentional disruptions occur and can be traced, managers are faced with the dubious luxury of having an identifiable point source of a set of actors who can be prosecuted or whose access to the system can be removed.

Changes to preventive measures often follow successful traces. The changes often are adopted as governmental initiatives such as the U.S. Food Modernization Act, Custom Trade Partnership Against Terrorism and the Advanced Electronic Notice of Shipping Manifests.

Some examples of industry initiatives are the California Leafy Greens Marketing Agreement, ISO 28000 standards, or the International Maritime Organization’s international ship and port facility security code.

Governmental initiatives have the advantage of leveling the playing field in terms of implementation costs but may not provide enough incentives for all parties along the supply chain to fully adopt food risk mitigation strategies. For example, smaller firms may be given more time to implement a policy or acquire more resources.

Strong central players in supply networks can complement federal efforts by imposing their own more stringent standards and traceability requirements such as Wal-Mart’s sustainability and food safety initiatives.

Only by achieving an accurate assessment and reduction of total risks can supply chain managers make informed decisions that lead to the least costly, most effective control of food risks.

NDSU Agriculture Communication – Jan. 15, 2014

Source:William Nganje, (701) 231-8587, william.nganje@ndsu.edu
Editor:Rich Mattern, (701) 231-6136, richard.mattern@ndsu.edu
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